CSE.SAS

System will fall more into debt, illiquidity will re-surface, need to look for other sources for capital, says broker

The much awaited announcement which kept the stock exchange jittery for weeks was finally made yesterday, with the market closed for a special bank holiday. The country’s capital markets watchdog the Securities and Exchange Commission (SEC) announced that limits imposed on brokers to extend credit would be relaxed which would increase the amount of credit available in the market by Rs. 5 billion.

However, a leading broker firm has warned that the market would have to look for other sources for capital because the fresh infusion of credit would soon wear-out.

The Colombo Stock Exchange has seen lacklustre trading in recent weeks and investors eagerly anticipated this relaxation of broker credit. The SEC was not able to make a swift decision on the matter as the market would have liked to and took its time to deliberate.

"At the Commission meeting held yesterday (Jan. 16), the Securities and Exchange Commission of Sri Lanka (SEC) decided to permit stock broking firms to leverage 3 times adjusted net capital with immediate effect. Adjusted net capital is the net capital computed as per the Colombo Stock Exchange (CSE) Member Regulations less 50 percent of fixed assets. In line with other regional markets, 50 percent was deducted to take into account the concerns of realizing illiquid assets into cash," the SEC announced in a statement yesterday evening.

"By permitting the stock broking firms to leverage 3 times adjusted net capital, the additional credit available in the market will increase by Rs. 5 billion resulting in the total credit available among stock broking firms to Rs 8.7 billion," it said.

"Having considered the dimensions of credit extension and to establish a balance between the two principals of lending norms and risk management, the SEC reviewed the Credit Extension by Stock Broker Firms Rule.

"As a capital market regulator, it is a core function of the SEC to ensure that capital and other prudential requirements are sufficient to address the level of risk taking by the stock broking firms in extending credit with adequacy in the financial strength, disclosures, systems and governance processes which should be monitored on a regular basis in order to prevent any systemic risk to the capital market. At present the stock broking companies are permitted to extend credit based on the liquid assets of the company less obligations," the SEC said.

The once-best performing stock exchange in the world, which grew 125 percent in 2009 and 96 percent in 2010, registered an 8.5 percent dip last year as controversy rocked an already overvalued market, analysts said.

The CSE has fallen 2.39 percent year-to-date as at January 13.

Last week, a leading broker firm urged stakeholders in the market to search for other sources of funding rather than depending on credit.

"The credit extension is ultimately one of the final bullets the regulators have to infuse the market with capital. If speculators and investors are unable to unwind positions and return to cash it could spell trouble for the markets. It is time for the brokers, regulators and investors to work together and look for other sources of capital for the markets. Every broker wants to attract the larger funds that are currently pulling out of the market. It is equally important to tap the global independent trader community that is always after a good trade. This will support and provide the much needed liquidity to the market. After all, this is a traders market and the year 2012 will be no different," Bartleet Religare Securities (BRS) said last Friday.

It said the relaxation of broker credit restrictions could temporarily give the marker some lift.

"If credit was extended…there will be a few billion worth of rupees coming into the market. This may provide temporary retail support for the index and may push the speculative counters higher. We forecast that the Bartleet Speculator Index (BSI) could run up another 10 percent to 15 percent in the next few weeks, while the ASPI will only gain 1/3 of that in value. As we have witnessed on the last few occasions, rally’s last at maximum 1 to 1.5 days. This is due to the fact that all the money that is used to pump up the system is borrowed.

"Eventually the new capital will also get stuck and the system will fall more into debt and illiquidity will return to the market. Again this is history repeating itself as markets very rarely learn their lessons of the past. Technically the ASPI is held down by its long term 100 day weekly moving average at 6,125 and it will be interesting to see if the Index can break pass this level and sustain itself. The MPI on the other hand is stuck in the range between 4,800 and 5,500 and does not seem to be going anywhere anytime soon," the BRS said.

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Favourable times, but Lanka yet to decide on bond issue

With robust inflows expected this year, the Central Bank says the government has not decided whether or not to go for another sovereign bond issue with the situation in international capital markets favouring Sri Lanka whose credit ratings have improved while some economies in the EU facing a debt crisis have seen their ratings taking a hit.

Standard and Poor’s, Fitch and Moody’s gave Sri Lanka favourable sovereign rating reviews last year, and despite Fitch warning of financial sector risk, and Moody’s highlighted concerns about the balance of payments these agencies still seem positive about the post-conflict economy’s prospects given the ongoing fiscal consolidation and successful programme with the IMF, although a review was not completed due to differences in opinion on exchange rate management.

"We expect healthy foreign currency inflows into government coffers this year, around US$ 2.4 billion, and we have not yet decided what the structure of these inflows would be. We have several options before us and one of them is a sovereign bond issue, but we have not decided yet," Cabraal said in a brief interview with The Island Financial Review yesterday (Jan. 16).

Over the weekend, Standard and Poor’s downgraded France’s sovereign rating to AA+ from AAA, undermining its leadership role, shared with Germany which still holds its AAA rating, in taking the eurozone out of the debt crisis. Several other European economies saw their ratings downgraded as well.

Despite the 3 percent devaluation of the rupee against the dollar, the US$ 1 billion sovereign bond trading in international markets was doing well.

Finance Asia, a reputed specialised magazine in the region, paid a glowing tribute to the sovereign bond issue noting that it was performing well despite the devaluation in November.

Capping the 10-year sovereign bond issue as the ‘Best Sri Lanka Deal’ in its Achievement Awards 2011, Finance Asia said in December that the award was given for the second consecutive year to the government. "Few other contenders can stand up against the sovereign, which has continued to lead the way. The country’s recovery story clearly resonates with investors, who continue to show strong demand".

"While this is not its 10-year debut, the bond nonetheless further establishes the sovereign’s following among global investors and creates a pool of liquidity it can tap in the future, bringing it closer to its more seasoned peers, the Philippines and Indonesia," Finance Asia said.

"Its ability to raise $1 billion of cash amid volatile markets is testament to how far Sri Lanka has come since ending its civil war. It also contrasts sharply with the experience of its embattled European peers. Sri Lanka paid a competitive 6.25 percent coupon for its 10-year bond and about 40 basis points less on a spread basis than previously. Sri Lanka’s sovereign bond was also well-timed to take advantage of a ratings upgrade from Fitch to BB- from B+. While the country devalued its currency by 3 percent after the bond issue — which some said had a psychological effect on investors — it is worth pointing out that the bonds were still holding up above par in December," Finance Asia said.

"The country’s economic scale and diversity, and per capita income level, are in line with most single B-rated sovereigns.

However, a peace dividend in the form of a pick-up in economic growth, if sustained, should translate into greater credit strength. The pace and permanence of an improvement in credit fundamentals will also be determined by the success of ongoing structural and fiscal reforms," Moody’s said earlier this month.

"Structural reforms to support longer-term growth prospects combined with further fiscal consolidation efforts would increase Sri Lanka’s chances of moving further up the ratings scale," Fitch Ratings said in December.

However, both agencies were concerned about the balance of payments situation, particularly the growing current account deficit.

With the Central Bank selling dollars to keep the exchange rate stable in the face of ‘severe’ import demand, this was adding pressure on money market liquidity levels already under stress from the growing demand in credit. Domestic interest rates have been under siege for the past few weeks, as continuously reported in these pages.

Cabraal has said a significant portion of the near US$ 25 billion foreign currency inflows expected this year would come in by the first quarter of this year, easing pressure on the balance of payments.

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VIENNA (AP) — OPEC says its estimates that world demand for crude will grow next year remain on track, despite the eurozone crisis and other economic problems.

The 12-nation group’s latest forecast is contained in its monthly report. In it, the Organization of the Petroleum Exporting Countries says world demand for 2012 is forecast to grow 1.1 million barrels a day next year.

That’s up from the 0.9 percent increase recorded last year.

The report says Monday that demand will likely drop in the major industrialized nations but grow by more than a daily 1 million barrels elsewhere.

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As tourism grows PET menace looms large

By Suren R. Mirchandani

Background…

Tourism arrivals are expected to increase significantly over the next few years as Sri Lanka positions itself as one of the worlds best leisure destinations, from a base of approximately 500,000 per annum to 2.5 million per annum. This rapid influx of visitors will place immense pressure on the local environment, particularly on waste buildup and management by local government bodies.

The potential for irreversible damage to Sri Lanka’s environment and reputation is very real and significant as evidenced by the already visible degradation and pollution in pristine environments such as Kalpitiya, Trincomalee and Arugam Bay. A significant increase of tourists will make an already bad situation much worse. The goal of this brief paper is to provide a case for a solution that will not only solve and reverse the situation at these pristine locations, but in doing so, to also provide local income benefits to local government and the community at large.

The problem…

Tens of thousands of PET bottles and plastic refuse today pollute our beaches. The local government lacks the resources or the skills to effectively deal with the buildup of PET. On average a PET bottle takes 1,000 years to degrade. PET bottles harm the marine environment, clog up river ways and are a breeding ground for disease. The PET menace is very visible all across Sri Lanka, with no proper disposal, recycling or system of management. Local communities take little interest in tackling this menace.

In comparison to countries such as Thailand with 30 million visitors per year, our beaches look very dirty with barely 500,000 visitors per year. It is clear that if Sri Lanka is to compete with mature, developed world class destinations there is urgent need to address the problem of PET and plastic pollution.

The PET menace – environmental impact…

The lack of purified water suitable for drinking at frontier tourism locations drives demand for bottled water in PET bottles. The PET bottles have direct and indirect environmental consequences:

1. Direct impact

Once used, tourists discard these bottles in cabanas and restaurants. The local communities do not have the resources to collect and recycle the significant quantities of waste generated. Instead the bottles are dumped into the sea or water bodies such as lakes, creeks and rivers. Even remote locations such as Peanut Farm close to Arugam Bay there is a unsightly build up of "garbage" - plastic bottles, plastic bags, and other trash that tourists have to literally walk through while accessing the beach – hardly the sort of experience that will generate a positive feedback on sites such as Trip Advisor which can make (or break) a destination.

2. Indirect impact

Water is trucked from factories situated far away from the delivery area, contributing to several tons of CO2 emissions and pressure on road infrastructure. The problem is exacerbated when one considers that the delivery vehicles return empty. In addition to pollution this adds tremendously to product cost thereby depriving retail traders of better margins. It is a tragedy of some proportin that we need to use trucks to bring water to a remote part of Sri Lanka when water is abundant everywhere.

Bringing about fundamental change…

It is apparent that unless a solution is soon found, our beaches may be overwhelmed with environmental degradation that will be difficult to reverse. A multi step approach is recommended:

1. Waste audit: Understand and quantify the problem

Commission a comprehensive waste audit in the target areas. A number of NGOs and companies with expertise in this field are available in Sri Lanka. A waste audit provides the basis for all future action, as the report will quantify the amount and types of waste being created, sources, existing disposal and recycle systems if any, and a minimum action plan. At all stages of this audit, the community leaders are engaged to ensure inclusive participation. The audit is also used to solicit longer term funding and technical support for the project goals.

2. Education for long-term success

The audit is followed by an education programme conducted by the same experts, engaging the local community at various levels on the benefits of waste management for preservation of their livelihoods, the health benefits of waste management and recycling, and other simple tools. Without long-term support from the local population, no system can be self sustaining.

"To plan for 10 years plant a seed. To plan for a 100 years, teach the people" -Confucius

3. Localize for a long term solution

The vision is to provide a practical solution that resolves pollution while at the same time providing parallel economic benefits that will reinforce local community commitment to the project. The solution involves the replacement of PET bottles with clean drinking water bottled at location itself and managed by the local government authority as an income and employment and income generation scheme.

Recommendations…

Provide the local government authority with a self-contained solar powered reverse osmosis plant to produce drinking water bottled at site. This project will enable the local authority to generate income that would otherwise be made by the large water suppliers in Colombo. By using recyclable glass bottles, the local authority can not only provide local employment (for the filling, delivery and pickup of bottles) but also provide local retailers with water at a much lower cost (no long distance transport) and hence higher margins. All this while the local and larger environment will be spared direct and indirect pollution generated by the PET water supply chain. The chain will be broken and water provided locally, by the community, to their visitors, while preserving their environment. The benefits are summarized below:

1. Environmental

= Direct impact: reduction/elimination of PET bottle menace

= Indirect impact: reduction/elimination of CO2 emissions in delivery

= Long term impact: maintain pristine nature of the destination for the community

2. Income for local authority

= Income from water sales to reinforce commitment to the environment

= Localize income that would otherwise fall into the hands of the water suppliers

= Empower the authority to initiate other projects to preserve the environment

3. Employment

= Direct employment to operators of bottling plant

= Direct employment to operators of delivery system

4. Improved profits

= By eliminating trucking costs and corporate margins, local retailers will make more money from water sales

Technology…

The past few years have seen a number of companies and organizations around the world develop a number of alternate technologies to produce drinking water using solar energy. Our nominated consultants will study the suitability of each solution for the target area.

On-shore solar distillation systems are contained in steel or concrete tanks over the ground and process ground or brine water. Solar energy increases the temperature within the water production structure, with minimum use of fossil fuels. The desalination process continues 24/7. The smallest plant will produce 230 m3/day. The average annual return on investment is 35%

In September 2006 in the small village of KOTRI bordering the Sambhar salt lake the first ever Reverse Osmosis plant has started functioning off solar power producing 600 litres of potable water (450ppm) from brackish saline water measuring TDS 4000-6000 ppm. The first village based plant of its kind in the country

For the purpose of this project, we will select a commercially solar array powered reverse osmosis plant capable of producing up to (add details) liters of drinking water per day, together with secondary treatment systems such as UV treatment or particulate filters.

Bottling…

A stock of 6,000 glass bottles should be sufficient to enable a ready supply of water.

Empty bottles will be collected from the delivery area whenever fresh supplies are dropped off. The authority will employ people to bottle and deliver water to local shops. Tourists can use the bottle (on which a nominal deposit is taken) to replace with a full bottle at any time. The installation of an industrial dishwasher may be sufficient to ensure sterilization of the bottles before refilling.

Pricing…

By eliminating "corporate margins" and the high cost of long-distance trucking the goal is to localize profits – bringing down the cost of water to the retailers and enhancing local margins.

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One of Sri Lanka’s three sovereign ratings advisors is slashing 3,500 jobs across its investment banking unit in a bid to avert risk.

Royal Bank of Scotland, the lender that is 83 percent owned by the British government, is to cut around 3,500 jobs as it sells and shrinks its investment bank, the Telegraph, UK, reported.

Royal Bank of Scotland, along with HSBC and Bank of America Merrill Lynch, were appointed by the government of Sri Lanka mid 2010 to advice it on improving sovereign debt ratings for a four year period.

The bank said in a statement last Thursday that it was considering sale or closure or its cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses.

These businesses had income of £220m in first three quarters of 2011 and are currently unprofitable, RBS said.

Stephen Hester, the chief executive, said: "It is clear that, particularly in the wholesale banking arena, significant new pressures have emerged. Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall."

The lender will reorganise its wholesale business into "markets" and "international banking", scrapping its former global banking and markets business (GBM).

It aims to cut the balance sheet of its former GBM business by £120bn to £300bn over the next three years.

John Hourican, the former GBM chief executive who is in line to pick up £4m in long-term incentive shares that he was awarded in 2009, will head the two businesses.

George Osborne last month told the bank to shrink its investment banking arm further to become less risky, despite it being halved in size over the past three years.

The jobs cuts will take place over three years and be split between the UK and operations abroad.

The bank reduced its headcount by 2,000 last year. It has cut around 30,000 jobs since being bailed out by the government.

Hoare Govett, one of the oldest and most distinguished names in British corporate broking, could be a casualty of the changes. The business was bought as part of its disastrous purchase of parts of Dutch bank ABN Amro in 2007.

The markets division, which comprises the bank’s main trading activities, will focus on the bank’s traditional strengths of debt, currency and money markets.

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Lanka takes steps to avert risks on rapid industrialisation drive

To meet EU (European Union) standards and woo image-conscious buyers, Sri Lanka’s garment industry has worked hard to raise its labour and environmental standards. Most of the leading manufacturers even tout eco-friendly plants that cut down on water and energy usage.

It is in such a context that the Central Environmental Authority (CEA) has taken a number of initiatives to maintain international standards, especially EU standards.

CEA Chairman Charitha Herath says that the CEA with the assistance of the Asian Disaster Management Center in Thailand and the United Nation’s Environment Programme (UNEP) had recently initiated a Programme on `Chemical Accident Prevention and Preparedness’ (CAPP) to ensure that standards were maintained.

He noted that with the rapid industrialization drive throughout Sri Lanka, increasing risk of exposure to hazardous chemicals is a common phenomenon.

Thus, it is an urgent need to increase Sri Lanka’s capacity to prevent the occurrence of chemical accidents and to be prepared to deal with such accidents efficiently. As such the main goal of this project was to reach a common understanding on current needs, priorities and share experiences on recent efforts in developing CAPP programmes in selected countries in Asia as well as in other countries such as the US and some European countries.

He believes this progamme also gives an opportunity to review and discuss the lessons learnt for Awareness and Preparedness for Emergencies at Local Level (EPL) which was successfully implemented in Sri Lanka and in other Asian countries like Thailand, India and Philippines. EPL standards are in line with the EU standards that open the way for opportunities in the European market. The process is usually facilitated by the Board of Investment and tourism industry. "We give our concurrences to the BoI and Tourism industry to market the country," he added.

CEA Rules

According to Herath, the CEA under Act No. 47 of 1980 introduced rules and regulations to control industrial noise and community noise. Rules and regulations for industrial noise were strictly adhered to during the past. The CEA clearance was granted only for the industries which were free from industrial noises. He observed that presently most vehicle drivers, especially bus drivers, sounded the horn with no concern towards the people or the environment. Some private bus drivers deliberately sound the horn to outflank rivals.

No person should be allowed to use or cause to sound vehicle horns beyond the limits under noise control regulations, he stressed. Sound limits are measured with an equipment accepted worldwide to maintain Sound Standards. Noise levels will be measured in terms of the sound pressure level SPL (Lamax) in decibels (DB) by using sound level metres conforming to Type One (1) of the British Standards (BS) measuring equipment as recommended by the CEA. Major noise pollution in our country occurs around commercial locations, mobile noise makers, public address systems, household activities and entertainment events, he added.

A recent survey has identified motor vehicles as the leading noise polluter in Sri Lanka. According to the survey such noise mainly originates from vehicle engines and silencers, particularly of buses and lorries. Some vehicle owners deliberately replace the factory fitted vehicle horns with louder air horns and also change silencers to enhance vehicle noise. A recent survey revealed that the drivers and conductors responsible for introducing noise are continually exposed to noise levels and face a greater risk of hearing impairment than the passengers themselves.

Noise causes many types of adverse health effects

The most prevalent irreversible occupational hazard worldwide is noise - induced hearing impairment according to WHO. The main social consequence of hearing impairment is inability to understand speech in day-to-day life. Noise interference with speech comprehension results in a large number of personal disabilities handicaps and behavioural changes such as problems in concentration fatigue, irritation decreased working capacity and a number of stress reactions.

According to WHO Children living in noisy areas such as near airports, industrial complexes and noisy streets prove that noise affects human physiological functions. Acute noise exposure also causes temporary changes such as increased blood pressure and heart beating. Susceptible individuals may suffer permanent effects such as hypertension and ischemic heart diseases as a result of prolonged exposure.

Rio 20

He believes regional wise carbon tax is of paramount importance. Sri Lanka will stick with the policy – the polluter should pay for his pollution, he stressed.

He noted that Rio+20 is expected to provide mechanisms and an enabling environment to fulfill technological and financial needs of member countries to achieve sustainable development targets and economic development goals. Mechanisms agreed should continue to strengthen the green growth options, low carbon climate resilient development, technology transfer, institutional strengthening, national and international level coordination and human capital.

Being a tropical island, Sri Lanka is prone to natural disasters and climate induced risks such as sea level rise, extended droughts, increased floods and landslides and changes in biodiversity etc. Climatic induced extreme events can take away much of the development gains in a very short spell of time.

The main climate induced challenges have been identified as food, water and energy security. Mainstreaming climate sensitivity and adaptation practices are primarily needed in agriculture, livestock, fisheries, health, water, energy and infrastructure sectors.

Investment needs for climate change adaptation measures are significant and it is expected that Rio+20 will improve access to technical support and resources for adaptation.

Promotion of renewable energy

Promotion of renewable energy sources as opposed to fossil fuel based energy is the best solution for the increasing energy demand and as a climate change mitigation measure. Potential for wind, biomass and solar energy development is significant in Sri Lanka.

Energy efficiency is another area especially in new constructions, urban energy use and water pumping. It is necessary to develop innovative investment plans to effectively develop potential renewable energy sources in the country. It is expected that Rio+20 will provide opportunities for increased investment on renewable energy development and use efficiency improvements.

The institutional architecture to support sustainable development must be built to meet the challenges in design and implementation of development programs including support to low carbon growth.

Improved skills and institutions are necessary to implement innovative financing systems and technologies to facilitate green growth. The national and international institutional systems should be strengthened to support three pillars of sustainable development, namely, social, economic and environmental.

Herath believes Greening an economy involves integrated development in various sectors such as industry, agriculture, trading, transport, energy, infrastructure, and services such as health, education and telecommunications etc. Planning and coordination mechanisms need to be established with the capacity to evaluate and decide on different growth options to suit the country’s requirement, while ensuring growth is sustainable and resource efficient.

This process requires improved capacity to compute and adopt environmental and ecosystem services into development planning and budgeting processes. It is expected that the Rio+20 will enable mechanisms and tools to improve integrated planning and coordination capacities including ecosystem based approaches.

He believes opportunities also exist to better coordinate the inputs and mechanisms of international agencies to minimize duplication and to meet the country’s needs. Rio+20 could go beyond the Paris Declaration related approaches to harness international knowledge and resources in an efficiently coordinated manner. It should also include the optimization of procedures to be adopted by Multilateral Implementing Agencies, he avers.http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=43309

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Tea Board prepares contingency plan in case of crisis in Middle East

Sri Lanka Tea Board is planning to shift the bulk of tea exports to China, India and other un-tapped markets in the event of any tension in the Middle East, as a survival plan, its Chairman Ms. Janaki Kuruppu said.

Kuruppu told The Inland Financial Review; "The tea industry has gone through the worst period during the recent past and it was resilient against any downturn. The main reason was that tea is one of the most popular beverages in the world. If the Middle Eastern crisis erupts we have to be concerned because Iran, Syria and other countries in this region are major tea buyers.

She said their newest strategy or the survival plan was to shift the bulk of tea output to China, India and other untapped markets by offering the right products to them. Therefore, the Sri Lanka Tea Board was looking at the problem case-by-case considering the Middle East issue, she said

To minimize any negative impact of a possible escalation of the Middle East crisis was to avoid logistic problems. They were now in the process of talking to all stakeholders including exporters, Tea Traders association and Planters Association to have a suitable survival plan, Ms. Kuruppu said.

Since the tea consumption pattern, or trends of tea, was in Sri Lanka’s favour, she said the most important factor was to offer the right product to the buyer by fine tuning flavours to suit different tastes.

The Chairman said that Sri Lanka could penetrate into any market "because our unique selling proposition was the flavour, which could not be copied at any cost owing to our soil and geographic condition". But the most important factor was to figure out a proper business model to cater to different markets.

At present, 60 percent of tea was being exported in bulk form while the balance was shipped in value added products/brands. Therefore, the Board encourages tea manufacturers to go for branded products, value addition to penetrate into new markets, she said.

To cater to different markets Ms. Kuruppu noted a three-pronged strategy which was to promote a wide rage of products, catering to different segments and entering to green tea markets which was popular due to health reasons.

She also said that for the long term sustainability of the sector and to make the industry viable, the government had identified priorities and for that purpose they had increased the minimum wage to Rs. 500 per day for plantation workers. Therefore, Plantation Management Companies had signed a collective agreement to increase wages of workers, she said.

The government had also taken the initiative to modernize all tea factories in the country. At present there were 718 factories in the country and the government had allocated funds to modernize 37 of them, she said.

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Renuka plans to buy Richlife Dairies

Jan 17, 2012 (LBT) - Sri Lanka’s Renuka Agri Foods says it is now working towards purchasing 76% of the issued share capital of Richlife Dairies Limited.In a stock market filing, the company announced that it has already signed an agreement towards this with Richlife.Renuka says the deal will go through upon the completion of a “Due Diligence” presently carried out by it.The listed agri food firm also announced that in terms of the agreement reached between the two firms, it has assumed management control of Richlife Dairies Limited with effect from the 13th January 2012.http://www.lbt.lk/news/business/1021-dairy-buy

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Lanka credit hits new level

Jan 17, 2012 (LBT) - Sri Lanka's credit to business from commercial banks rose to a new historic high of 63.2 billion rupees in November helped by liquidity injections to offset foreign exchange interventions, official data showed.In the 12-months to November 2011, credit to business grew 33.5 percent to 1,945.7 billion rupees against 33.4 percent in October.Credit to government was also grew at a new annual high of 42 percent to 801.5 billion rupees, up from 33.4 percent in October. Loans to the state from the banking system was largely driven by Central Bank credit as the monetary authority bought government securities to back liquidity injections made to offset forex market interventions.

Central Bank credit to the state was 39.6 billion rupees in November. Credit to state enterprises also rose 18.1 billion rupees to 179.3 billion.

Sri Lanka had to generate more power from thermal energy, but costs are not passed to the economy, pushing up borrowings and worsening aggregate demand. There is also no price formula for fuel, with diesel in particular being under-priced. Credit to state energy utilities, which are dependent on imports, immediately hit the balance of payments. A price adjustment on the other hand would kill an equal amount of consumption demand in the economy, creating no pressure on the balance of payments.

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Sinhaputhra Finance PLC Changes Board

Jan 17, 2012 (LBT) - In a filing to the Colombo Stock Exchange, Sinhaputhra Finance PLC made an announcement of the resignation of their Chairman Mr. K H K Wijayadasa and two of their directors Mr. A M G Weerakoon and Mrs. C M Balalle from the board with effect from 29th December 2011.

At a Board meeting held on the 29th of December 2011 it was decided to appoint Mr. Ekanayake Athukoralage Don Premalal Ekanayake and Dr. Amal Randhir Karunaratna to the directorate of the company. The board of directors also has resolved to appoint Mr. Nihal Nissanka Ratnayake as Chairman with effect from 29th December 2011.http://www.lbt.lk/news/business/1023-board-change

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Lanka IOC buys cargo from Reliance

Lanka IOC, the Sri Lankan arm of India's state petroleum firm, has bought a combination cargo of gasoline and gasoil for delivery in February from India's Reliance at firmer levels than a previous cargo, Reuters reported quoting industry sources.

The company bought 11,000 tonnes of 90-octane gasoline and 10,000 tonnes of 91-octane gasoline at premiums of about $2.70 and $4 a barrel to Singapore quotes respectively, a source familiar with the matter has said.

Lanka IOC, part of Indian Oil Corp., also bought 9,000 tonnes of 0.25 percent sulphur gasoil at a premium of $3.50 a barrel, higher than an earlier cargo it bought to be delivered in January at a premium of $3.20 a barrel.http://www.lbt.lk/news/economic/1024-feb-cargo

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Heavy Vehicles to be allowed on Sri Lanka's Southern Expressway from next week

Jan 17, 2012 (LBT) - The Director of Expressway Management Unit of Sri Lanka's Southern Expressway B.D.K. Bandara said that the heavy vehicles would be given permission to run on the expressway from next week.

Trucks, container careers, lorries, and other heavy vehicles will have to pay between Rs. 1,500 and Rs. 2,000 to run on the expressway.

However, the operators of the expressway will give permission only to the suitable heavy vehicles to run on the Expressway, the director stated.

Also, the vehicles will have to pay service charges in case of removal from the expressway due to breakdown, the official said.

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Lanka IOC, the Sri Lankan arm of India's state petroleum firm, has bought a combination cargo of gasoline and gasoil for delivery in February from India's Reliance at firmer levels than a previous cargo, industry sources said on Monday.

The company bought 11,000 tonnes of 90-octane gasoline and 10,000 tonnes of 91-octane gasoline at premiums of about $2.70 and $4 a barrel to Singapore quotes respectively, a source familiar with the matter said.

Lanka IOC, part of Indian Oil Corp., also bought 9,000 tonnes of 0.25 percent sulphur gasoil at a premium of $3.50 a barrel, higher than an earlier cargo it bought to be delivered in January at a premium of $3.20 a barrel